“Pay yourself first” is a personal finance strategy if you’re not yet familiar with the phrase. This principle applies to dividend stocks and dividend income. It basically means you can fund your future passive income stream using your free cash today.
Fortunately, you don’t need substantial funds to fatten your dividend income. You can take positions in two high-yield stocks whose prices are less than $10. While they are small-cap stocks, the combination is good for income generation.
Source: Getty Images
Shareholder return model
Surge Energy (TSX: SGY) has attracted investors for its better-than-expected performance (+34.8%) so far in 2025 amid a challenging environment. At $7.32 per share, you can feast on the 7.2% dividend yield. Also, the payout frequency is monthly, not quarterly.
Like with most energy stocks, commodity price volatility is a perennial risk. The $719.4 million oil-focused exploration and production (E&P) company operates conventional, high-quality oil reservoirs. The operations are concentrated in Western Canada, particularly in Sparky and South Saskatchewan, two of Canada’s top four oil plays.
In the first three quarters of 2025, net income was $47.4 million compared to the $51 million net loss in the same period in 2024. Notably, free cash flow rose 29% to $104.9 million. Under its shareholder return model and FCF framework, Surge strategically allocates cash flow between focused capital projects and returns to shareholders. Any excess FCF is used to reduce net debt.
The heavy focus on oil and high liquids weighting results in higher realized prices compared with natural gas-heavy producers. Surge’s conventional reservoirs have low decline rates, a key to maximizing FCF. Last, there’s long-term production predictability owing to the long-life drilling inventory (12 years) in the company’s core areas.
Consistent income provider
Doman Building Materials Group (TSX: DBM) is a distributor of building materials and home renovation products, serving North American clients. The $822.8 million company’s operational exposure in both Canada and the U.S. lessens the impact of regional economic downturns.
If you invest today, the share price is $9.43 per share, while the dividend offer is 6%. Regarding dividend payments, DBM has kept investors whole for 61 consecutive quarters, notwithstanding economic cycles.
The business remains resilient due to the focus on renovation. Strong sales to home improvement chains and independent lumberyards indicate a robust repair and renovation (R&R) market. According to management, the R&R segment is generally more stable than the new home construction market. It also serves as a defensive layer when the housing market is down.
Doman is Canada’s only fully integrated national distributor in the building materials sector. This is a competitive strength because the company has full supply chain control. Furthermore, the vertical model allows better supply chain management and product quality control, and more competitive pricing.
In Q3 2025, consolidated revenues and net earnings increased 20% and 24%, respectively, to $795.1 million and $18.1 million compared to Q3 2024. Amar S. Doman, Chairman of the Board, said, “Our balance sheet at September 30th is strong and provides a strategic platform for our continued success.
Money-making team
Surge Energy and Doman Building Materials are an ideal money-making team. The low correlation between their primary revenue drivers mitigates risk.
